State opts to privatize prison food service, saving taxpayers $12 million a year

5:49 PM, April 30, 2013

Detroit Free Press Lansing Bureau

LANSING — Officials said Tuesday they plan to privatize food service for 45,000 state prisoners, eliminating about 370 state jobs and saving more than $12 million a year.

The Department of Corrections will contract with catering giant Aramark in a three-year deal worth close to $50 million a year, department spokesman Russ Marlan said.

The state put the food service out to bid last year, but an analysis by officials from the Department of Technology, Management and Budget, and the Department of Corrections, concluded Aramark and a second company that bid would not save taxpayers enough money to justify privatization.

State officials reworked the numbers after concerns were raised by Republican lawmakers and found errors were made in the analysis, said Department of Technology, Management and Budget spokesman Kurt Weiss.

Nick Ciaramitaro, legislative director for AFSCME Council 25, which represents the state’s prison food workers, said he’s concerned “the administration is once again bowing to the farthest right wing of the Republican party,” and has improperly “massaged” the analysis.

“We want to see the numbers.” said Ciaramitaro, who added government layoffs are stalling an economic recovery that is under way in all other sectors.

Sen. John Proos, R-St. Joseph, chairman of the Senate Appropriations Subcommittee on Corrections, has pushed the department to benchmark its costs against the private sector and hailed the decision as a victory for taxpayers.

“Although prison populations have decreased, the costs keep going up,” Proos said. “This is a major move by the department that will help bring Michigan’s per-prisoner costs in line with surrounding states. It will also ensure that taxpayer dollars are spent efficiently.”

The Michigan Civil Service Commission requires the state to demonstrate a cost savings of at least 5% before privatizing services delivered by state employees. As a matter of policy, the state typically shoots for a 10% savings.

In analyzing the numbers, state officials adjusted the bids to account for post-retirement costs, such as health care, that the state will have to pay whether the food service is privatized or not. Aramark’s bid, when adjusted upward to account for those costs, was calculated at $62.2 million a year, Marlan said. Trinity Services Group bid was adjusted to $66.3 million. The state initially concluded Aramark would save the state about $2.2 million a year, or 3.3%.

But Weiss said there were problems with the analysis because many prisoners skip meals and the bidders’ prices were not adjusted downward to reflect that. Analysts also didn’t recognize Aramark was prepared to put its employees through the same security training that state food workers receive, meaning extra corrections officers wouldn’t have to be assigned to the kitchens to provide security.

Aramark will be paid $49.7 million a year under the three-year contract, which has an option for two additional years, he said. Aramark’s cost per meal is $1.29, compared to the state cost of $1.96. he said.

Savings are projected at $12 million in the first year with additional savings expected after that, Weiss said. Savings are projected to be closer to 20% than 10%, he said.

It’s not clear when the contract would take effect. It still requires approval from the State Administrative Board and the Civil Service Commission. It’s expected Aramark will offer jobs to many of the state workers, Marlan said, though wages and benefits are expected to be lower.

Most of the affected state workers are in the $17- to $22- an hour pay range, state records show.

Aramark, headquartered in Philadelphia, is one of the biggest food service and facilities management companies in the world, with more than 250,000 employees in 22 countries. It handles food service at more than 600 prisons in North America, according to the company’s Web site.